1. SAP R/3
Materials Management
Module

2. Materials Management
• Procurement
• Inventory Management
• Warehousing
• Material Master
• Materials Planning
• Hazardous Materials Management

3. Organizational Elements
• Organizational elements are structures that
represent the organizational views of an
enterprise.
• Company structure is designed based on
business processes.
• The organizational elements provide a
framework that supports all business
activities.

4. Organizational Elements for the
Procurement Process
• Company Code
• Plant
• Storage Location
• Purchasing Organization
• Purchasing Group

5. Company Code
• A company code represents an
independent accounting unit.
• Balance sheets and Profit and Loss
statements, required by law, are created at
the company code level

6. Plant
• A plant is an organizational unit within a
company. It produces goods, renders
services, or distributes goods.
• A plant can be one of the following types
of locations:
– Manufacturing facility
– Warehouse distribution center
– Regional sales office
– Corporate headquarters

7. Storage Location
• Storage locations are organizational units
that allow the differentiation of material
stocks within a plant.

8. Purchasing Organization and
Groups
• Decentralized with a separate organization
for each plant.
• Centralized, one organization for all plants.
• Hybrid - multiple organizations buy for
multiple plants.
• Groups can be a further division of
purchasing responsibility and/or structure.

9. Material Master
• The material master contains all data
required to define and manage material.
It integrates data from engineering,
manufacturing, sales and distribution,
purchasing, accounting, and other
departments.
• The material master is used as a source
of data for purchase order processing
throughout the procurement cycle.

10. Material Master - View(s)
• The R/3 system allows selection and
maintenance of the data that is relevant to
a particular department.
• To create a view, the view must be selected
on the “Select View(s)” screen before the
material data is entered.
• Users are responsible for creating and
maintaining the view(s) of the materials that
are relevant to their departments.

11. Material Master - Industry Sector
• Industry sector determines the type of
industry to which the material will be
assigned.
• Industry sector information determines:
– which screens will appear and in what
sequence
– what industry-specific data will appear

12. Material Master - Maintenance
• Defaults - speeds entry of data by using the most
frequently used organizational levels and views
as default values. These defaults are user-
specific and may be overridden.
• Reference Material - speeds entry by copying
pertinent data from existing material master
records.
• Profiles - speeds entry by copying standard data
created in a profile into a selected view.
• Collective entry of storage locations - speeds
creation of additional storage locations by adding
multiple locations at one time.

13. Material Master - Material Type
• Groups material with same basic attributes
• Determines:
– which department views are maintained
– whether changes in material quantities are
updated
– whether internal or external procurement is
allowed
– which general ledger accounts are updated

14. Vendor Master
• The vendor master includes all the data
necessary for processing business
transactions and corresponding with
vendors.
• Information is shared between the
accounting and purchasing departments.
• Data is grouped into three categories:
– general data
– accounting data
– purchasing data

15. Basic Procurement Process
• Requirements determination - purchase
requisition
• Source determination - RFQ and quotation
• Vendor selection
• Order processing - purchase order
• Order follow-up
• Goods receipt and inventory management
• Invoice verification
• Payment

16. Purchase Requisitions
• Internal document
• Requesting a certain quantity of material or
service on a certain date
• Can be created:
– Manually
– Automatically (MRP, sales orders, etc.)
• Release approval procedures can be
established

17. Purchase Requisition Sources
• Manually created by user department
• Automatically created by:
– Planning (MRP, MPS)
– Plant maintenance
– Production orders
– Sales orders

18. Processing Purchase
Requisitions
• Create purchase requisition (manually or
automatically)
• Determine source of supply
• Release procedure (optional)
• Allocate vendor and process

19. Creating a Purchase Requisition
• Default data for line items
– delivery dates, plants, purchasing groups,
etc.
• Maintain line item data
– materials, quantities, delivery dates, etc.
• Maintain account assignment (if required)
– cost center, G/L accounts, project number,
etc.
• Check data
• Save

20. Purchase Requisitions - Menu
Paths
• Create: Logistics -> Materials management
-> Purchasing -> -> Requisition -> Create
• Change: Logistics -> Materials
management -> Purchasing -> ->
Requisition -> Change
• Display: Logistics -> Materials
management -> Purchasing -> ->
Requisition -> Display

21. Purchase Requisitions –
Transaction Codes
• Create: Logistics -> Materials management
-> Purchasing -> -> Requisition -> Create
• Change: Logistics -> Materials
management -> Purchasing -> ->
Requisition -> Change
• Display: Logistics -> Materials
management -> Purchasing -> ->
Requisition -> Display

22. Purchase Orders
• Purchase orders are:
– a formal request to provide materials or
services
– an internal planning and tracking tool
• Purchase orders identify:
– vendor
– material and/or service
– quantity and price
– delivery dates
– terms of payment

23. Purchase Order Structure
• Header - information specific to the entire
purchase order
– vendor
– currency
– payment terms

24. Purchase Order Structure
• Line item details
– account assignment
– delivery schedule
– materials/services quantity
– price
– description
– item category

25. Item Category
• Item category defines the form of
procurement
• Whether a purchase order requires:
– material number
– account assignment
– goods receipt and/or invoice receipt
• Examples:
– subcontracting
– consignment
– stock transfer

26. Purchase Order Output
• Request for quotations
• Purchase order
• Order acknowledgment

27. Purchase Order Output Format
• Printed and mailed
• EDI
• Faxed (hardcopy or electronic)

28. Purchase Order - Menu Paths
• Create: Logistics -> Materials management ->
Purchasing -> -> Purchase order -> Create
– vendor known
– vendor unknown
– via requisition
• Change: Logistics -> Materials management ->
Purchasing -> -> Purchase order -> Change
• Display: Logistics -> Materials management ->
Purchasing -> -> Purchase order -> Display

29. Purchase Order – Transaction
Codes
• Create: Logistics -> Materials management ->
Purchasing -> -> Purchase order -> Create
– vendor known
– vendor unknown
– via requisition
• Change: Logistics -> Materials management ->
Purchasing -> -> Purchase order -> Change
• Display: Logistics -> Materials management ->
Purchasing -> -> Purchase order -> Display

30. Goods Receipt
• Goods receipt with reference to a purchase
order:
– copy data from purchase order
– delivery notification
– invoice verification
– updates PO history
– inventory update
– automatic update of G/L accounts
• You can search for the PO number with:
– material number, vendor number, etc.

31. Goods Receipt Destinations
• Stock - given a storage location, can be
posted to three different stock types:
– unrestricted-use
– quality inspection
– blocked stock (valuated)
• Consumption - can be assigned a recipient
or unloading point
• Goods Receipt Blocked Stock - updates
inventory, but material is not valuated
(conditional acceptance)

32. Goods Receipt - Movement
Types
• Movement types - stock transactions:
– goods receipt
– goods issue
– stock transfer
• Movement type determines which:
– quantity fields are updated
– stock types are updated
– G/L stock or consumption accounts are
updated
– fields are displayed during document entry

33. Movement Type - Examples
• 101 - goods receipt for purchase order
into warehouse/stores
• 102 - reversal of goods receipt for
purchase order into warehouse/stores
• 122 - return delivery to vendor
• 501 - receipt w/o purchase order into
unrestricted-use stock

34. Goods Receipt - Account
Postings
• Inventory account is debited at standard
price
• GR/IR clearing account is credited at
purchase order price
• Price difference account is debited
(credited) with difference between standard
price and purchase order price

35. Effects of a Goods Receipt
• PO history and PO updated
• Material master - stock and value updated
• Notification of goods receipt issued (optional)
• Transfer request to Warehouse Management
system (if active)
• Material and financial documents created and/or
updated
• Stock and consumption accounts updated
• Inspection notification in QM (if active)

36. Goods Receipt - Menu Paths
• Create: Logistics -> Materials management ->
Inventory management -> -> Goods movement ->
Goods receipt -> For purchase order ->
– PO number known
– PO number unknown
• Change: Logistics -> Materials management ->
Inventory management -> -> Material document -
> Change
• Display: Logistics -> Materials management ->
Inventory management -> -> Material document -
> Display

37. Goods Receipt – Transaction Codes
• Create: Logistics -> Materials management ->
Inventory management -> -> Goods movement ->
Goods receipt -> For purchase order ->
– PO number known
– PO number unknown
• Change: Logistics -> Materials management ->
Inventory management -> -> Material document -
> Change
• Display: Logistics -> Materials management ->
Inventory management -> -> Material document -
> Display

38. Invoice Verification
• Matches the vendor’s invoice to the
purchase order and the goods receipt (3rd
part of 3-way match)
• Matches price and quantity
• Updates the purchase order and its history
• Updates accounting information

39. Invoice Payment
• Selects invoices for payment based on the
payment terms in the vendor master or
purchase order
• Generates payment for released invoices
• Updates accounting information

40. Accounts Payable Payment
Process
• Determines:
– open items to be paid
– when they will be paid
– bank from which payment will be made
– payment medium
– who will get paid
• Payment process creates a financial
accounting document to record the
transaction

41. Invoice Processing - Menu Paths
• Enter an Invoice: Logistics -> Materials
management -> Invoice verification -> Invoice
verification ->-> Document entry -> Enter invoice
• Change: Logistics -> Materials management ->
Invoice verification -> Invoice verification ->->
Further processing -> Change
• Display: Logistics -> Materials management ->
Invoice verification -> Invoice verification ->->
Further processing -> Display

42. Invoice Processing - Menu Paths
• Payment Processing: Accounting ->
Financial accounting -> Accounts payable -
>-> Document entry -> Outgoing payment
-> Post
• View PO History Documents: Logistics ->
Materials management -> Purchasing ->->
Purchase order -> List display -> By PO
number

43. Invoice Processing – Transaction
Codes
• Enter an Invoice: Logistics -> Materials
management -> Invoice verification -> Invoice
verification ->-> Document entry -> Enter invoice
• Change: Logistics -> Materials management ->
Invoice verification -> Invoice verification ->->
Further processing -> Change
• Display: Logistics -> Materials management ->
Invoice verification -> Invoice verification ->->
Further processing -> Display

44. Invoice Processing - Menu Paths
• Payment Processing: Accounting ->
Financial accounting -> Accounts payable -
>-> Document entry -> Outgoing payment
-> Post
• View PO History Documents: Logistics ->
Materials management -> Purchasing ->->
Purchase order -> List display -> By PO
number